FDIC Quarterly Banking Profile
ALL INSTITUTIONS PERFORMANCE
FIRST QUARTER 2018
Notes to Users
Net Income Increases 27.5 Percent From a Year Earlier Due to Higher Net Operating Revenue and a Lower Effective Tax Rate
Aggregate net income for the 5,606 FDIC-insured commercial banks and savings institutions reporting first quarter performance totaled $56 billion in first quarter 2018, an increase of $12.1 billion (27.5 percent) from a year earlier.1 Improvement in net income was attributable to higher net operating revenue (the sum of net interest income and noninterest income) and a lower effective tax rate, but was offset in part by higher loan-loss provisions and noninterest expense. Using the effective tax rate before the new tax law, estimated net income would have been $49.4 billion, an increase of $5.5 billion (12.6 percent) from first quarter 2017.2 The average return on assets rose by 24 basis points from first quarter 2017 to 1.28 percent. Less than 4 percent of institutions were unprofitable during the quarter, the lowest level since first quarter 1996.
Net Interest Income Rises 8.5 Percent From the Year Before
Net interest income rose by $10.3 billion (8.5 percent), as more than four out of five banks (85.9 percent) reported an increase from 12 months ago. For the past seven consecutive quarters, the annual growth rate for net interest income has exceeded 7.4 percent. The net interest margin (NIM) increased from 3.19 percent in first quarter 2017 to 3.32 percent, due to growth in interest income as interest-bearing assets rose by 3.6 percent. The improvement in NIM was widespread, as more than two out of three banks (69.4 percent) reported increases from a year earlier.
Noninterest Income Increases 7.9 Percent From a Year Earlier
Over the past 12 months, noninterest income grew by $4.9 billion (7.9 percent) to $67.4 billion. This increase is the highest 12-month growth rate since third quarter 2014. The annual increase in noninterest income was led by higher trading revenue (up $1.1 billion, or 14.9 percent) and other noninterest income (up $2.4 billion, or 8.8 percent).3 More than half (55.1 percent) of all banks reported increases in noninterest income compared with first quarter 2017.
Noninterest Expense Increases 5.8 Percent From a Year Earlier
Noninterest expenses were $6.3 billion (5.8 percent) higher than first quarter 2017, as almost three out of four banks (74 percent) reported increases. Other noninterest expense rose by $3.7 billion (8.6 percent), and salary and employee benefits grew by $2.3 billion (4.3 percent). Average assets per employee increased from $8.2 million in first quarter 2017 to $8.4 million.
Provisions Increase Modestly From First Quarter 2017
In the first quarter, banks allocated $12.4 billion in loan-loss provisions, an increase of $356.6 million (3 percent) from a year earlier. Almost 37 percent of institutions reported higher loan-loss provisions than in first quarter 2017. The increase is due to higher net charge-offs, and a growing loan portfolio. Loan-loss provisions as a percent of net operating revenue totaled 6.2 percent for the first quarter, down from 6.6 percent a year ago.
Net Charge-Off Rate Remains Stable
Banks charged off $12.1 billion in uncollectable loans during the quarter, an increase of $540.6 million (4.7 percent) from a year earlier. The annual increase in net charge-offs was led by credit card balances (up $1.1 billion, or 16.3 percent). However, less than half (42.9 percent) of all banks reported a year-over-year increase, and net charge-offs were lower for most major loan categories. The average net-charge off rate remained stable (0.50 percent) from a year earlier.
Noncurrent Loan Rate Declines Modestly
Noncurrent loan balances (90 days or more past due or in nonaccrual status) were $3.9 billion (3.4 percent) lower compared with the previous quarter. Slightly more than half (50.8 percent) of all banks reported declines in their noncurrent loan balances during the quarter. The decline in noncurrent loan balances was led by residential mortgages (down $2.8 billion, or 4.9 percent), commercial and industrial loans (down $617.2 million, or 3.4 percent), and credit cards (down $436.4 million, or 3.7 percent). The average noncurrent rate declined by 5 basis points from the previous quarter to 1.15 percent.
Coverage Ratio Rises to 110 Percent
Banks reduced their loan-loss reserves by $15 million from the previous quarter, with less than one-third (23.8 percent) of all banks reporting a quarterly decline. Banks with assets greater than $1 billion, which itemize their reserves, reported the largest quarterly increase in reserves for credit card losses (up $850.2 million, or 2.3 percent).4 Reserves declined for residential real estate losses (down $654.3 million, or 4.5 percent) and commercial loan losses (down $368.5 million, or 1.1 percent). With noncurrent loan balances declining at a faster quarterly rate than loan-loss reserves, the coverage ratio (loan-loss reserves to noncurrent loan balances) increased from 106.3 percent in fourth quarter 2017 to 110 percent. This marks the fourth consecutive quarter that the coverage ratio was above 100 percent.
Equity Capital Rises Modestly
Bank equity capital rose by $11.2 billion (0.6 percent) from the previous quarter. Retained earnings contributed $25.3 billion to equity growth, but were offset in part by the decline in the market value of available-for-sale securities, which reduced accumulated other comprehensive income by $25.8 billion. Declared dividends in the first quarter totaled $30.7 billion, an increase of $3.3 billion (12.2 percent) from the year-earlier quarter. At the end of the quarter, 99.5 percent of all insured institutions, which account for 99.98 percent of total industry assets, met or exceeded the requirements for the highest regulatory capital category as defined for Prompt Corrective Action purposes.
Banks Increase Their Federal Reserve Bank Balances
Total assets increased by $116.1 billion (0.7 percent) from the previous quarter. Balances at Federal Reserve banks increased by $41.9 billion (3.6 percent). The securities portfolio declined by $32.9 billion (0.9 percent) from the previous quarter, as available-for-sale accounts fell by $11 billion (0.4 percent) and held-to-maturity accounts were reduced by $26.7 billion (2.6 percent). This marks the first time since third quarter 2010 that securities held-to-maturity declined.
Loan Balances Rise 4.9 Percent Over 12 Months
Total loan and lease balances rose by $31.3 billion (0.3 percent) from fourth quarter 2017. Commercial and industrial loans increased by $38.6 billion (1.9 percent), nonfarm nonresidential loans grew by $11.5 billion (0.8 percent), and residential mortgage loans rose by $8.8 billion (0.4 percent). Credit card balances posted a seasonal decline of $44.6 billion (5.2 percent). Over the past 12 months, total loan and lease balances rose by $455.2 billion (4.9 percent), exceeding last quarter's annual growth rate of 4.5 percent. Commercial and industrial loans increased by $91.8 billion (4.7 percent), residential mortgage loans grew by $87.8 billion (4.4 percent), credit card balances rose by $64.3 billion (8.5 percent), and nonfarm nonresidential loans increased by $56.1 billion (4.2 percent). Home equity lines of credit declined by $31.6 billion (7.3 percent) over the past 12 months. Unused loan commitments increased by 5.5 percent from a year earlier, the highest annual growth rate since first quarter 2016.
Deposits Increase From the Previous Quarter
Total deposits grew by $129.7 billion (1 percent) in the first quarter. Domestic interest-bearing deposits increased by $176.1 billion (2 percent), while noninterest-bearing deposits fell by $655.9 million (0.02 percent). Nondeposit liabilities declined by $24.1 billion (1.2 percent), led by other liabilities (down $30.7 billion, or 1.9 percent) and borrowings from Federal Home Loan Banks (down $28.6 billion, or 4.9 percent). Domestic deposits in accounts less than $250,000 rose by $169.7 billion (2.9 percent) from fourth quarter 2017.
Three New Charters Added in First Quarter 2018
There were 5,607 FDIC-insured commercial banks and savings institutions at the end of first quarter 2018, a decline from 5,670 the year before. The number of institutions on the FDIC's "Problem Bank List" fell from 95 to 92. During the quarter, 65 institutions were absorbed by merger transactions, three new charters were added, and there were no failures.
Chart 1. Quarterly Net Income
Chart 2. Quarterly Net Operating Revenue
Chart 4. Reserve Coverage Ratio
Chart 6. Quarterly Change in Loan Balances
TABLE I-A. Selected Indicators, All FDIC-Insured Institutions
TABLE II-A. Aggregate Condition and Income Data, All FDIC-Insured Institutions
TABLE III-A. First Quarter 2018, All FDIC-Insured Institutions
TABLE IV-A. Full Year 2017, All FDIC-Insured Institutions
TABLE V-A. Loan Performance, All FDIC-Insured Institutions
TABLE VI-A. Derivatives, All FDIC-Insured Call Report Filers
TABLE VII-A. Servicing, Securitization, and Asset Sales Activities